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Sunday 10 June 2012

Osborne Says A Big European Boy Did It

The UK electorate has been presented with a litany of excuses from various Government ministers as to why the economy is showing every sign of stagnation – or worse – while not looking like it is about to recover any time soon. Now, the Rt Hon Gideon George Oliver Osborne, heir to the seventeenth Baronet, has decided that the Eurozone did it and ran away.

Yes, the “turmoilcaused by all those bailouts is to blame. And that really is coming it. The austerity programmes may well be hurting the UK’s exports, but for Osborne that is a difficult one, as we’re being told that austerity in the UK is Quite A Good Thing. We are also not part of the Eurozone, so why all the ructions there should be stopping us getting on with business is mystifying.

Most trade that UK businesses do is within the UK. And we’ve had a variable exchange rate for Sterling versus the Euro ever since the single currency started. Moreover, the people within the larger Eurozone economies haven’t stopped consuming, and nor have those elsewhere in the world. Anyone listening to Osborne’s tale of woe might be forgiven for thinking war had broken out.

Good businesses adapt to changing circumstances, especially twitches in the exchange rate. As Channel 4 FactCheck pointed out last November, trade between the UK and the rest of the EU hit a record high in the previous August, growing far more than trade with the rest of the world. If problems within the EU had been hitting our economy, we wouldn’t have seen that growth.

Osborne’s assertion has been predictably rubbished by “Auguste” Balls, who points out that thus far France and Germany have avoided recession, while the UK has experienced the dreaded “double dip”. All those export markets are still there, the exchange rate has moved about 2% in the last two months (at 1.237 Euro to the £, it’s still well short of the 1.45 of pre-2007 times), so what is the problem?

The real problem looks more and more like lower demand within the UK, and that will only be exacerbated by cutbacks in the public sector – unless the private sector moves to replace that demand. But, with unemployment levels as they are right now, it’s clear that the private sector has not been able to step in, and nor is it being crowded out by Government spending.

Even some out there on the anti-EU right wing of Osborne’s own party don’t buy this line, as witness Douglas “Kamikaze” Carswell asserting that the Chancellor’s claim ismisplaced”. The attempted link looks increasingly like a false assumption: UK economy is bad, there are problems in the Eurozone, therefore one is responsible for the other. But he ends up with a lame excuse instead.

Because it wasn’t a big boy that did it and ran away. Try again, George.

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